Louisiana Internet Software & Technology Association Blog : Louisiana Internet Software & Technology Association : LISTA Blog : LA Technology Law News & Updates

 Angel groups have grown significantly in the last decade, as more and more organizations have been established and more individual angels have joined the groups. Angel groups now exist in nearly every American state and Canadian province. In May of 2008, the Angel Capital Association listed 165 members. Recently the Angel Capital Education Foundation listed 281 Angel groups in 49 US states and Canada. The only state not represented was Louisiana. That number is now 282 with the addition of South Coast Angel Fund, which now represents Louisiana on that list.

The term “angel” originated in the early 1900s and referred to investors who made risky investments to support Broadway theatrical productions. Today, the term “angel” refers to high-net worth individuals, or “accredited investors,” who typically invest in and support start-up companies in their early stages of growth.

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 The 36th International Conference and Exhibition on Computer Graphics and Interactive Techniques is ongoing in New Orleans from August 3 to 7, 2009.  The Siggraph Conference is being held at the New Orleans Convention Center and details about the program can be found on the web at the conference web site. For more information on Louisiana's digital interactive media tax credit program, please go visit the exhibits presented by the Louisiana Department of Economic Development, Greater New Orleans, Inc. and the Baton Rouge Digital Industries Consortium. 

Erich P Rapp.

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The Wall Street Journal on Monday July 6, 2009 had a Page C-1 story entitled, Venture-Backed Start-Ups Seek Stimulus. The gist of the story was that venture funds like Novak Biddle Venture Partners, RockPort Capital Partners and Flywheel Ventures were directing the start-ups they are investing in to explore the federal stimulus package as a means of finding additional capital.

This story suggests to me that venture capital funds and angel investors would find Louisiana's new digital interactive media tax credit incentive program very attractive. Marketable tax credits are not much different in economic terms than stimulus program grants. A start-up developing a web platform, mobile application or software package can get marketable tax credits equal to 35% of the funds they spend in Louisiana on labor residing in the state and 25% of all other expenditures.

If, for example, a start-up used labor residing in Louisiana to develop a new web platform and in the process spent $1,000,000 in Louisiana. The State of Louisiana would issue tax credits for $350,000 and the start-up could sell the tax credits for $0.85 to $0.90 on the dollar realizing perhaps a little more than $300,000 in extra funds. Thus, a venture capital fund investment of $1,000,000 spent on labor residing in Louisiana becomes an investment of $1,300,000.  That seems like stimulus that a venture capital fund or an angel investor would like to see.

Erich P Rapp.

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As Louisiana becomes a hub in the next few years for the development of software, mobile applications and web platforms, I am wondering what value can Louisiana digital interactive media developers bring to the industry. One area that desperately needs to be addressed is the news media and journalism.

It is no secret to anyone that is conscious that the industry that delivers news to the public is struggling to find a profitable business model in the digital media age. Where is this industry heading and can developers in Louisiana add value to the evolution.

Perhaps, the Politico.com web site and the story behind it present a glimpse of the business techniques that will govern the future of journalism and news delivery.

The first and foremost Politico.com business concept that stands out to me is volume of content and extreme detail about a relatively narrow (at least for a newspaper) subject. It's hard to imagine any traditional media source providing as much detailed and essentially real time data about politics in Washington DC. While the Federal Register provides a great deal of detail about federal action, its not anything close to "real time" and it is completely devoid of the human component. Politico is the federal register of politics using a Twitter model without the 140 character limit and a huge mix of gossipy human stuff. No one but a reporter at Politico could possibly want to know this much about politics in Washington DC. 

And yet, I am told that Politico is profitable and widely read. That is more than the New York Times can say at least as to the profitable part. All of this suggests that no matter how much detail one provides about politics in Washington DC, there is at least some audience for it. It also suggests that if you can place an enormous amount of entertaining (at least to someone) political information in a digital setting at a low enough cost , the business can pay for itself with advertising. The delivery of news has a "long tail" component. 

The August 2009 issue of Vanity Fair magazine contains an article entitled, Politico's Washington Coup which describes the Politico story in some detail. If you want a sense of the future of journalism, this article is a good read.

This may hold some promise for local newspapers. The key to the future for local newspapers may be more information. Adding more stories in a digital format does not cost as much as adding more pages for more stories in a printed newspaper. The specialty for the local paper is local news. Local news is as to your local newspaper as Washington politics is as to Politico. It seems like the local newspapers need to go more local with everything, e.g., more local business news, more local society and social event news, and more local entertainment news. Change the emphasis from the AP news feed to everything local with the names of as many local people printed in the newspaper as possible.

Digital interactive media developers in Louisiana need to partner with traditional media organizations to build a better news delivery device using Louisiana's digital media tax credits incentive program.

Erich P Rapp.

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I am very concerned about the market for transferable Louisiana Tax Credits after reading about the problems that members of the New Orleans Saints have had. See Ex-Saint Kevin Houser says tax credit fiasco not his fault. 

Louisiana needs a "Tax Credit Exchange." I will propose to the membership of LISTA that they advocate the creation of a non profit corporation (need to check with my tax attorney friends on this concept) to operate a Tax  Credit Exchange that would make a market for certified tax credits and various grades of contracts to deliver tax credits at a future date.

The paper work and related contracts would be uniform and the status of the contracts would be verified with the appropriate arm of Louisiana government.  If the contract involves little more than a "hope and a prayer" that the person entering into the contract will apply for credits and undertake a creditable business venture in the future, those credits will be deeply discounted and the purchaser will understand that he is purchasing a very speculative contract.

Alternatively if the purchaser decides to buy an existing tax credit that is certified by the state, the value of that credit will be much less significantly discounted. The customers in the market will be better educated about what they are buying, and the process of selling the credits into the market will be orderly and uniform.

I will be reaching out to people with expertise useful in the creation of such a market in the weeks ahead. If you have such expertise and want to help create an orderly market for tax credits in Louisiana, I am looking for your help.

If you think I am making a mistake with this recommendation, I would also like your input. I think we need a more orderly market that discourages the type of problems the New Orleans Saints players have had (but for the grace of god go I), but I want to know what y'all think. I want to start a discussion of the problem. Please write comments on this blog entry and send me email correspondence with your thoughts on this subject.

I am very open to discussion about this subject. Please comment.

Erich P Rapp.

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Senate Bill 277 concerning digital interactive media has been formally sent to the Governor for his signature on Thursday June 25, 2009. We hope that the Governor will act soon on this important piece of legislation.

Unfortunately, a proposed amendment to the new digital media program allowing a digital media tax credit recipient to have the state convert the tax credit to cash at $0.90 on the dollar did not complete the legislative process on Thursday before the formal deadline for adjournment. This concept was presented to LISTA by the Baton Rouge Area Chamber of Commerce. We felt this option was an excellent addition to the program proposed in SB 277. LISTA regrets that this amendment was not adopted by the legislature as a whole. We will review this concept again in two years at the time of the next Louisiana fiscal legislative session.

In the coming weeks, the original members of LISTA will meet to discuss the future direction of the organization. One of my first proposals to the membership will be opening membership up to a broader group of interested people and companies. The original members were asked to make substantial financial contributions in order to get the organization started. I will now propose to the membership that the average cost of membership be reduced significantly and that the organization make efforts to enlist many new members.

As with any government sponsored business incentives program, the new digital media program will not survive unless it is beneficial to the state as a whole. Determining whether the program is successful requires an expert in economics and financial analysis to review and analyze all of the available relevant data. I would like to see LISTA join with other economic development agencies and organizations in Louisiana to sponsor a university professor's effort to track all available data on the digital media industry in Louisiana from July 1, 2009 and forward to determine whether the digital media act is fulfilling its potential for the state.

I would also like to see LISTA and such a university professor track the geographical distribution of the beneficiaries of the digital media act in the state. Our goal at LISTA is to encourage and support growth of digital interactive media businesses throughout the state. We thus want to know the extent to which this goal is being fulfilled.

The new digital media program will also lead to the adoption of related rules for the administration of the program by the Louisiana Department of Economic Development. LISTA and its members will actively participate in and comment on the development of such rules. 

Additionally, LISTA and my law firm, Kean Miller, will undertake a series of presentations inside and outside of the state on the use of the digital media tax credit program. Further still, LISTA and Kean Miller will begin offering educational seminars on topics of interest to the digital media community. 

Again, I offer my thanks to all of the people who assisted with the adoption of SB 277. It has been an educational and ultimately gratifying experience for me.

Erich P Rapp.   

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